The cost of shipping containers from the Far East is now out of control. The latest quote we saw this morning for a 40 foot container was $14,500 for Shanghai to Dublin vis Rotterdam. Compare that with a published average price over the last five years for shipping a 40 foot container from Shanghai to Rotterdam of circa $1,925.
Even for European manufactured goods, many raw materials and components come from the Far East, and this is also pushing up prices here.
Other factors feeding into the deteriorating situation is also soaring demand for consumer goods, and a major shortage of containers. Many ports are saturated with empty containers. Some others have thousands of containers containing PPE being stored at high costs to governments.
One example a few months ago, at the Port of Felixstowe, there were about 11,000 containers filled with masks and gloves have blocked about 30 per cent of the port’s inbound container space since last September. As of end of last November, about 4,000 of these containers remained in the port yards.
Ship that may have usually docked in the UK, have diverted to ports like Antwerp, Zeebrugge, and Rotterdam.
There are also too few ships and a shortage of dock workers in many countries.
It is not just the crazy increase in price for transporting goods across the world, but also the delays due to the global Covid-19 pandemic, the well publicised blockage of the Suez Canal by the massive Ever Given container ship and now the new Covid-19 outbreak at Yantian port, means one of the most important ports in the world is operating well below half of regular capacity. Slower gate activity, leads to longer delays and a lack of schedule reliability.
Experts say that Asia to North Europe rates for 40 foot containers is edging towards $20,000 per 40ft. This represents an incredible 1,000 per cent increase on the spot rate for the trade a year ago. This is not sustainable for many importers of products from the Far East. The costs of a 40 foot container from Shanghai to Rotterdam is about two-thirds more again than the direct Shanghai to a US west coast port due to distance/travel times and different waterways.
Bloomberg, the respected business, markets news, data, analysis organisation says that with upwards of 80 per cent of all goods trade transported by sea, freight-cost surges are threatening to boost the price of everything from toys, furniture and car parts to coffee, sugar and anchovies, compounding concerns in global markets already bracing for accelerating inflation.
One source that we spoke to from the Irish auto aftermarket said that we can unfortunately expect to see this put some businesses to the wall, and cause many other s great distress. It will also impact job creation targets and the vast majority of goods will go up in price, some dramatically. Rising inflation rates are inevitable.
Up to now, Chinese foreign trade growth production is up 28.2 per cent since the start of this year, so why should the they intercede? Well up to now, they had no reason to, but our information is that the cost of shipping has now reached a critical level and buyers are cancelling orders with Chinese factories. The key law of economics – that of diminishing returns, has kicked in for many and it will for many more if container transport prices rise over $15,000 and head towards $20,000. Perhaps China will be better incentivised to intervene then.
The US Government and the EU need to act with China and others to stop this crisis developing further negativity in the markets. The deck is heavily stacked in the big ocean carriers’ favour Governments.
From the Irish perspective, our Government need to lobby the EU urgently to intervene in this worsening crisis. As we are a island nation cut-off from the EU mainland and all the additional costs that brings with it for businesses, we action from the EU and supports for our effected businesses. Failure to act swiftly, will impact on Government tax revenue, job creation targets plus higher unemployment, reduced competitiveness, increasing inflation rates, and other related issues.